Orders Issued Under Bank Holding Company Act

Federal Reserve Bulletin, May, 2001 by Robert Frierson

Orders Issued Under Section 3 of the Bank Holding Company Act

Bank Hapoalim, B.M.
Tel Aviv, Israel

Zohar Hashemesh Le'Hashkaot Ltd.
Tel Aviv, Israel

Hapoalim U.S.A. Holding Company, Inc.
New York, New York

Arison Holdings (1998) Ltd.
Tel Aviv, Israel

Israel Salt Industries Ltd.
Atlit, Israel

Order Approving Formation of Bank Holding Companies and Acquisition of a Bank

Bank Hapoalim, B.M. ("Bank Hapoalim"), Zohar Hashemesh Le'Hashkaot Ltd. ("Zohar"), Hapoalim U.S.A. Holding Company, Inc. ("Hapoalim U.S.A."), Arison Holdings (1998) Ltd. ("Arison"), and Israel Salt Industries Ltd. ("Israel Salt") (collectively, "Applicants") have requested the Board's approval under section 3(a)(1) of the Bank Holding Company Act ("BHC Act") (12 U.S.C. [sections] 1842(a)(1)) to become bank holding companies by acquiring control of all the voting shares of Signature Bank, New York, New York ("Bank"), a de novo New York State-chartered bank.(1)

Notice of the application, affording interested persons an opportunity to comment, has been published (65 Federal Register 57,353; 69,537; and 70,570 (2000)). The time for filing comments has expired, and the Board has considered the application and all comments received in light of the factors set forth in section 3 of the BHC Act.

Bank Hapoalim, with consolidated assets of $52.8 billion, is the largest banking organization headquartered in Israel.(2) Bank Hapoalim maintains three branches in New York, New York; a branch in Chicago, Illinois; an agency in Miami, Florida, and a representative office in San Francisco, California. Bank Hapoalim also engages in securities brokerage activities in the United States.

Competitive Considerations

The proposal involves the formation and acquisition of a de novo bank. The Board previously has noted that the establishment of a de novo bank enhances competition in the relevant banking market and is a positive consideration in an application under section 3 of the BHC Act.(3) There is no evidence in this case that the transaction would lessen competition or create or further a monopoly in any relevant market. Accordingly, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market, and that competitive considerations are consistent with approval.(4)

Financial, Managerial, and Supervisory Considerations

The BHC Act requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in the proposal and certain supervisory factors. The Board has reviewed information provided by Bank Hapoalim, confidential supervisory and examination information, and publicly reported financial and other information in assessing the financial and managerial strength of Bank Hapoalim and its subsidiaries. Bank Hapoalim's capital ratios exceed the minimum levels that would be required under the Basle Capital Accord and are considered equivalent to the capital that would be required of a U.S. banking organization. In addition, the Board has reviewed supervisory information from the home country authorities responsible for supervising Bank Hapoalim concerning the proposal and the managerial resources of Applicants, as well as reports of examination from the appropriate federal and state supervisors of the U.S. operations of Bank Hapoalim assessing its managerial resources. Based on all the facts of record, the Board concludes that the financial and managerial resources and future prospects of Applicants and Bank are consistent with approval under section 3 of the BHC Act.

Under section 3 of the BHC Act, the Board may not approve an application involving a foreign bank unless the bank is "subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in the bank's home country."(5) The Supervisor of Banks, who heads the Banking Supervision Unit within the Bank of Israel, is the primary regulator of Israeli banks, including Bank Hapoalim. The Supervisor of Banks conducts on-site examinations of Bank Hapoalim that cover areas such as major lines of business, risk management, corporate governance, compliance, asset quality, and transactions with affiliates. These examinations include a review of Bank Hapoalim's internal audit function and internal audit reports. Examinations by the Supervisor of Banks include frequent targeted examinations of specific business lines or supervisory areas. Although the Bank of Israel does not generally conduct on-site examinations of foreign offices, the Supervisor of Banks reviews Bank Hapoalim's foreign operations based on periodic reporting provided by Bank Hapoalim and information provided by host country supervisors.

External auditors evaluate Bank Hapoalim's internal controls and audit Bank Hapoalim's consolidated financial statements annually. Their comments and findings are provided to the board of directors of Bank Hapoalim. The Supervisor of Banks reviews the findings of the external auditors.